Winged Ecstasy

On the drive from Ouzilly to Mortemart, a distance of about 25 miles, we encountered dozens of cows, hundreds of sheep and only about six cars. There was little noise. Except for the lowing of cattle and the calling of birds, few sounds are heard in this part of the world.

Mortemart is an ancient town with a convent and a chateau that once belonged to a friend of de la Rochefoucauld’s. It is a cute place, with exposed-stone houses, tiled roofs, a covered market that looks at though it might have sheltered Caesar’s legions and a menacing swan in the moat around the chateau. But it is tiny – with only about 200 inhabitants.

Still, it has a restaurant that makes the pleasant drive even more worthwhile.

We had been sitting at the restaurant – accompanied by my friend Michel and his wife, Agnes – for only a few minutes when something very unusual happened. It was a warm night, so we chose to sit outside where we could watch the stars and the occasional passing automobile.

What caught out attention was the arrival of a Rolls Royce bearing license tags from Monaco. Hmmm… you are almost as likely to take a vacation on a Russian submarine in the Baring Sea as see a Rolls Royce in Mortemart. The French tax wealth – so people hide it. And this area is, after all, a long way from Paris.

But here was not merely a Rolls, but a fairly new one. It parked alongside the restaurant and four people emerged, an older couple and a younger one. The younger couple were in their early 40s I would guess. The only thing I noticed was that the younger man was in a wheelchair and the younger woman looked very trashy – with a pair of platform shoes, shiny pants and a face that would not have been out of place on the Rue St. Denis.

I have been thinking about how the Internet changes the world.

“You are schizophrenic about the Internet,” complained Michel, philosopher and auto buff, “on the one hand you say it is nothing at all and that the dot.coms will crash…and on the other, you say it is completely changing the world. It cannot be both.”

But it does seem to be both. Like life itself, each day is completely new…and much like the day before.

A new Rolls can be bought for about $200,000. But it will not get you to Mortemart any quicker or more comfortably, nor more safely than my $30,000 Renault. Why do people buy them? What information – available on the Internet – would lead a person to buy a Rolls?

As you may remember, Nietszche made the distinction between the knowledge you have that is direct, personal, and immediate – the things you know indirectly, abstractly and remotely.

Michel gave me an example, “My neighbor’s swan was eaten by a fox. From the fox’s point of view, the event had real meaning – he was hungry. He ate. But from our perspective, it is only has meaning in a literary sense.”

The Internet extends the division of labor – by allowing further and further specialization. This little hamlet where we had dinner, for example, used to be almost completely self-sufficient. The farmers grew wheat which was milled nearby and cooked into bread in ovens right on the property. Chickens, cows, pigs, vegetables – almost everything on the menu came from the farm. Even clothes were made here – the sheep were sheared, and the wool spun into fabric and then made into clothes. There is still a woodworking shop and a forge/machine shop on my farm – both of which are still in use.

But now, even the local farmers buy their lamb from New Zealand, their clothes come from Malaysia, and their roof tiles come from Spain or Italy.

Not only are they dependent on the division of labor – they have also lost the knowledge of isolation. Hardly anyone recalls how to make raw wool into a sweater… And when we wanted to fire up our bread ovens – just to see how they worked – we had to get an 80-year-old man from the nearby town to show us how. Younger people just don’t know.

As the division of labor expands, knowledge also expands – but it also gets spliced and diced into ever finer pieces and spread all over the world. Our lives depend on the food we eat – but we usually have no idea how the food is produced or what is in it. We also depend on water…and heat – and yet, we don’t really know how or where they come from. Who understands how a refrigerator works? Who can write a software program? If you studied electrical engineering in college, will you understand genetic engineering? And how do we know that the Russians are not preparing a nuclear strike against the U.S. at this very moment?

The Digital Men believe that somehow with all the 1’s and 0’s pilling up – we will all gain access to the information we want and need. There will no longer be any trade secrets or rip-off auto repair shops.

But while information is cheap…knowledge is dear. It takes time to learn how to do anything. It can take a lifetime to master a trade – even a trade that is as rudimentary and analog as woodworking or gardening.

And the Internet has done nothing to expand the supply of time. In fact, au contraire, it has made time more dear. A 1978 book by Herbert Simon, cited by Marc Faber in his July newsletter, explains why: “In a world where attention is a major scarce resource, information may be an expensive luxury, for it may turn our attention from what is important to what is unimportant.”

Much of the expertise you find on the Internet – and elsewhere – turns out to be fraudulent. Apart from the obvious mountebanks in psychology, feminology, political science, sociology, ethnic studies and other academic sinecures, there are also the quacks in the financial markets.

You may remember Henry Blodget, whose pronouncements on Internet and tech stocks are still taken seriously. Marc Faber reminds us of others: “Consider a company like Qualcomm, a pioneer of wireless data technology. In March, an analyst forecast that its stock would rise to $500.. But now, barely three months later, the stock is down to $56…”

Or, “take an [another] example, Computer Associates. Just before Independence Day, the company announced that it would miss analysts’ estimates for its fiscal quarter ended June 30…instead of earning 55 cents as analysts had been expecting, it would report quarterly earnings of just 11 to 16 cents (about 80% lower than expected.) How is it possible that none of Wall Street’s highly paid analysts knew of the earnings shortfall before the company made its announcement?”

The Internet is full of unimportant information – distractions, time wasters, and urgent messages that mean nothing. How do we know where – among the dirty pictures and stock touts – to find what we really need?

And as the division of labor and knowledge fragments, people become further and further removed from real knowledge of anything. Most of what we think we know is second hand, inferred, abstract, remote guesswork.

Information is no longer what we want. We can get as much as we could ever want – for free. But it is an expensive luxury.

Instead, what we really want is to know what is important and what is not. This is not information. Nor even knowledge. It is not digital. It is analog. It is judgment. Wisdom. Style. Grace.

A Rolls Royce is a not so much a means of transportation as it is a fashion statement. It is a declaration of what is important to the owner, an inside-joke maybe, or like a Louis Patek watch…a tool for a scam artist.

The distinctive radiator, Michel pointed out to me, is modeled after a Greek temple – rational, classical… digital. But on top of the radiator (significantly) sits a statue of winged ecstasy, Dionysian, irrational, kitschy and completely analog.

Michel, it turns out, owns a Rolls Royce himself. “Why don’t you drive it?” I asked him.

“The air conditioning doesn’t work.”

Your humble, Renault-driving, scribbler,

Bill Bonner

August 25, 2000

P.S. Enjoy the weekend.

*** Another mystery: how come the Big Techs are getting bigger when the economy seems to be slowing? Techs, as Barton Biggs pointed out yesterday, are cyclical. They grow in a booming economy – and typically go down when things slack off.

*** Yesterday came word that sales of durable goods fell at the highest rate ever recorded – down 12.4%. Requests for unemployment payments increased too, for the 4th week in a row – another sign of that the red-hot economy is cooling off.

*** Which suggests another mystery: Why do they give people money when they lose their jobs, anyway? If public officials really wanted to keep people employed – they’d impose a fine…like a speeding ticket…on jobless people.

*** The Dow rose 38 points. The Nasdaq climbed 42 points. It is still vacation season. Everything is quiet. In fact, volatility is at a 2-year low.

*** The only excitement yesterday was in the biotech area – where stocks rose about 5%.

*** But the bear managed to grab a couple of companies for a little afternoon snack. The Financial Times reports that Rolls Royce shares fell 22%. Elsewhere I learned that Bausch and Lomb fell nearly 40% yesterday. More about Rolls below.

*** There were 1431 Advancing shares on the NYSE; 1381 shares fell back.

*** “Any time there is a sign that those stocks [the big techs] are going to start moving,” said an analyst quoted by Reuters yesterday, “everybody jumps into them.” But it’s already standing room only in the Big Tech area. And competition is heating up. Bill Gates announced he would go head to head with Intel by producing Internet chips himself. And Amazon will soon be selling automobiles. Mercedes announced a price cut of nearly 20%.

*** Gold rose $1.80 after losing $2.60 on Wednesday. Platinum rose $2.50.

*** Oil and the dollar both fell slightly.

*** Not all prices are falling. Electricity increases are in the news everywhere. Oil is twice as high as it was a year ago. Natural gas is hitting records. Labor costs – from the anecdotal evidence, at least – are soaring.

*** Mr. Market is a man of mystery, paradox, contradiction… he’s not making it easy for us to figure out his next move.

*** Since 1982, the Dow has never fallen below the low of the previous year. The low for 1999 was 9120. So, far this year, the Dow has not even come close.

*** But, “given the rapid and unforeseen changes that are not taking place in the world,” writes Marc Faber, “any forecast that is based on the simple extrapolation of past trends into the distant future is likely to be very wide of the mark.”

*** What’s ahead? There are some things you can extrapolate into the future: Technological progress will continue to be made – in fits and starts, by trial and error, luck and flashes of insight. Analog Man, though facing extinction, will continue to crowd into hopeless investment positions. And the future will reveal itself in its own good time.

*** “He writes books called ‘Earth in the Balance’ and lashes out at ‘Big Oil’,” writes Steve Sjuggerud of the Ultimate Digital Man, Al Gore. “Yet he owns a quarter of million dollars of Occidental Petroleum stock.” Over the last 100 years, the Dow has performed significantly better under Democrat Presidents – 7.0% a year over 48 years – than under Republican Presidents – 4.0% a year over 52 years. But past performance is not necessarily indicative of future results… *** And so, a very busy week is coming to a close. A few friends remained after the Internet Conference, but they are leaving today.

*** Game Boy has grown up and become a dad. Nintendo announced a new ‘Son of Game Boy’ – to make its debut next year. Jules will be excited about this. He’s visiting friends in Carcasonne in the south of France. Henry, meanwhile, is staying with a friend on the Atlantic coast.

*** And the Border Patrol announced it has broken up an improbable smuggling scheme in which Mexicans were given bikes and biking gear and sent speeding through border crossings as if they were part of an international race (Laredo, Texas).

*** One of the biggest impediments to the division of labor (and material progress) has been the border guards – who stop the free flow of labor, capital and goods. Each economy has been imprisoned within its own frontiers. But now the Internet gives people wings. You can fly over borders via the Internet – work, trade, exchange ideas and information – without ever getting your passport stamped or having your underwear inspected. More below.

*** Mr. Deshais seemed to have lost a skirmish, yesterday, in his battle with demon rum. He had the high ground in the morning. But by the afternoon, he was dreamily stirring his pots of tomatoes – which he is canning – and singing to himself. Like the rest of us Analog folks, Mr. Deshais’s progress in life is episodic.